UK energy co Centrica to invest $100m in Israeli startups

Centrica's first investment has been to lead the $12 million financing round in Israeli electric vehicle charging point monitoring company Driivz.

UK energy company Centrica is set to invest an estimated $100 million in Israeli startups this year, sources inform "Globes."

The first company, which has already received an investment, is Driivz. Centrica led the company's $12 million first financing round, with participation in equal shares from UK investment fund Ombu Group. Driivz has developed a data system for managing electric vehicle charging systems that enables the companies operating the charging points to monitor customers' use and charge them accordingly. 200,000 drivers worldwide currently use the system.

Centrica's investment in Driivz was made through an investment fund founded by Centrica a year ago; this fund will also be used for subsequent investments. The fund's budget is $140 million, mostly designated for Israel. Centrica investment director Idan Mor told "Globes" that the company was about to close a large financing round of another Israeli startup in the field of cybersecurity for industrial infrastructure and would invest in a third startup later this year. Centrica is also considering investment in yet another startup. The names of these additional startups have not been disclosed.

Centrica is an energy services holding company for major energy supply companies in the UK, the US, and other countries. Centrica, which owns British Gas and US company Direct Energy, currently has 28 million customers worldwide and 33,000 employees; its revenue totaled $37 billion in 2017. In 2015, Centrica acquired Israeli company Panoramic Power for $60 million. Panoramic Power became Centrica's development center in Israel. Panoramic Power CEO Yaniv Vardi joined Centrica's global management and is currently its marketing manager for Europe (excluding the UK) and head of its business solutions division in Mexico.

Mor says that Centrica is in the final stages of competitive negotiations with international energy companies to set up a consortium to support Driivz's technology and promote it in US and East Asian markets. "We took the first financial lead in order to generate financial attractiveness and the company is ready for investment by global investors. We're not so interested in maximum control of the company; we want global players with access to the various markets, including Japan and the US. I already have overbooking for investments and have the luxury of choosing the more strategic investments."

Centrica has also begun integrating Driivz's technology in the service platform that it offers its customers throughout the world and has also added the technology to its bid in UK energy tenders.

Centrica has founded 4,000 charging stations worldwide and recently won a $21 million tender for building a charging system for Transport for London electric vehicles in which 300 rapid charging points will be set up in London by 2020.

"Investors don't know the energy needs"

Mor, a former investment director for semiconductors and clean tech at the Evergreen venture capital fund in Tel Aviv, believes that energy tech has substantial economic potential in Israel. "Energy in Israel is one of the sub-investments. I've been at my job for eight months and I've seen over 100 super-interesting companies so far at reasonable prices. This market is not being priced properly, not because there aren't good opportunities in it, but because investors don't know enough about the energy needs in the market. Israel's advantage is that it has great talents and few investors in this area. Driivz is a good example: they came to us as a private company without no venture capital fund at all behind them. This is a pearl for us, also because they are in the electric vehicle sector in which we're looking for investments."

Mor says that the company is considering other technology areas. For example, he is considering companies in energy accumulation, a rising field in energy tech that makes it possible to store energy from renewable sources and use it at other times, or to store energy at times of low use and use it at peak times. He adds that there are companies in Israel like StoreDot, which recently raised large amounts of money, developing new chemistry technologies, but also many companies doing other things in the sector. "We're seeing open-minded companies that we can tell that there is a need and open a window for them to a world they never thought of."

Mor explains that there are three models for investment in Israeli companies. In the first model, Centrica invests money in a company from the Series A stage onward, and if it becomes strategic for Centrica, it is likely to offer to acquire it. In the second model, Centric invests smaller amounts in a seed round for companies in early stages through the Labs fund. In the third model, Centrica directly acquires a company of interest to it through its mergers and acquisitions arm, which is also looking for attractive deals through the company's Israeli office.

"Globes": So you are both manager of the investment fund and a technologies scout for the company.

Mor: "My mandate is to make good investments and if I bring a good investment that makes profits, I'm rewarded for it. 3-4 investments a year for one person in one blockchain is considered high. In Evergreen, we did 1.5 investments a year in my field at best."

Investment in 14 companies worldwide to date

Centrica has invested in 14 startups to date, mostly in the US, but also other places. The fund focuses on three areas: decentralized electrical grid technology, in which the end customers both consume and produce electricity and there is a need for streamlining and managing the system; technologies for electrical vehicles in all aspects, which is rapidly gaining momentum; and 4.0 industrial technologies, industrial IoT, connectivity, and the smart home. Mor says that these three spheres are fruitful ground for finding technologies in Israel.

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The acquisition of Panoramic Power by Centrica was an interesting model of merger and acquisition. Panoramic, founded in 2009 by David Almagor and Adi Shamir, continues to operate on its site in Israel and Shamir is still CTO. "The world of energy is changing and energy companies are looking for a way to reinvent themselves by generating new growth engines," Vardi says. He adds that the corporate business solutions (CBS) division has set a target of a $1 billion business volume by 2022 through a focus on growing spheres: energy decentralization and the digital transition for the knowledge-intensive world, and the combination of both on the company's platform.

Vardi says that Panoramic Power, whose technology has become important in Centrica's strategy, was initially a clean tech company that found it difficult to raise the necessary capital: "Clean tech is not a glittering sector; it has almost no exits. We were the first exit in the infrastructure sphere. Then we changed the focus from clean tech to machine learning and big data. There are 2,000 sites on which the technology is installed, 500 customers, 60,000 sensors, and all this means more than 12 billion data a month. Machine learning is suddenly becoming very important. From a clean tech company, we have become a data analysis company."

By installing small electricity consumption sensors connected as wrapping on electricity cables of every device, the company provides the customer with insights about not only the enterprise's electricity consumption, but also operational efficiency, malfunctions on the production line, and even comparison with the efficiency of other manufacturers in the same category.

Other solutions offered by Centrica include the ability to guide the enterprise's electricity consumption hours and the ability to return electricity to the grid - capabilities that in advanced countries entitle companies to payments from the government, which Centrica shares with the customers. Other focuses are technologies for converting energy from gas to electrical energy, which in Italy is rewarded with generous government benefits. These spheres are still undeveloped in Israel.

According to Vardi, a significant proportion of these new technologies are being worked on in the Israeli center in Kfar Saba: "At the time of the acquisition, one of my conditions was that they would develop a technological center here. We're hiring people all the time. There are already 50 people in software and advance information processing, sensors, and integration of software in sensors. Here the company is building its main platform that connects all the solutions together."

Another important element in Centrica's activity is electric vehicles, a revolution that has run down in Israel since the downfall of Better Place. The popularity of electric cars in China (annual sales of 1.5 new cars) and the intention of several countries to ban sales of gasoline-powered cars within a few years are likely to give a boost to Centrica - and to the local companies in which it invests.